Dow 13,000: What it really means

The real question about the Dow crossing the 13,000 mark today is, what took it so long? The march to this psychologically important milestone has been greased with hundreds of billions of dollars from the Federal Reserve and other central banks. With all that money bouncing around and healthy corporate balance sheets, it’s a wonder the Dow didn’t cross 13,000 months ago. Did the Greek deal help? Sure. Is it a sign that the economy is healing? Maybe. But, as the blog Zero Hedge points out, these are nominal gains. In “real” gold terms, the index is still down significantly.

Even so, this is good news for millions of working stiffs stuck in 401(k)s. The Wall Street Boyz are making out, too. What’s not to like? The NASDAQ is now higher than it stood in 2007. The Standard & Poor’s 500 Index, a broader and perhaps more meaningful yardstick, is still lower than its 2007 peak.

The Dow long ago detached itself from the real economy. So this is an important breakthrough for the market, but it doesn’t remove the headwinds that the economy still faces, from high unemployment and stagnant wages to the continuing housing disaster.

Risks to a continued rally are abundant. Oil prices are rising, the Eurozone is not out of the danger zone — Europe is essentially in a recession — and China hasn’t managed a soft landing. Super-fast trading presents an ongoing risk to the market. And our friends the too-big-to-fail banks remain a systemic risk to the economy. Sooner or later, all those toxic “assets” on the Fed’s books will have to be disposed of.